LONDON (Reuters) -Britain’s economic output struggled to grow in November after finance minister Rachel Reeves announced big tax increases for businesses, official data showed on Thursday.
Gross domestic product rose by 0.1% from October, the first month-on-month increase since August but weaker than the median forecast in a Reuters poll of economists for a 0.2% rise.
Reeves, whose Oct. 30 budget included heavy increases in social security contributions paid by employers, said after the data release that she was “determined to go further and faster to kickstart economic growth.”
Reeves will meet regulators on Thursday to discuss what they can do to help the Labour government meet its promise to voters of faster economic growth.
Lindsay James, an investment strategist at Quilter Investors, said Britain’s economy was only at modest risk of going into a recession but the full impact of the budget was yet to come with the tax rises due to start in April.
“Businesses will soon feel the effects of increased national insurance contributions,” James said. “In addition, Trump’s inauguration is nearing, and the true effects of his policies will start to be felt later in the year.”
Sterling fell, dropping by about a fifth of a cent against the U.S. dollar before recovering some of that loss.
Britain’s economy, which was slow to recover from the COVID-19 pandemic, showed zero growth in the third quarter when uncertainty about the upcoming budget hit businesses. The Bank of England expects another flat-lining in the last three months of 2024.
Concerns about weak growth contributed to a recent surge in British government borrowing costs before they dropped sharply on Wednesday after a surprise fall in inflation at home and U.S. price growth data.
The Labour government says it is targeting the fastest per capita growth in gross domestic product among the Group of Seven advanced economies.
Compared with a year earlier, economic output was 1.0% higher in November, the ONS said, weaker than the 1.3% expansion forecast by economists.
(Reporting by Suban AbdullaEditing by William Schomberg)
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